Client Alert : Equatorial GUINEA and all CEMAC MEMBER STATES

 

BEAC INSTRUCTIONS RELATING TO THE REVISED FOREIGN EXCHANGE REGULATIONS

The FX Regulation applies to all six (6) Central African states (Cameroon, Central African Republic, Chad, Congo, Equatorial Guinea and Gabon). It applies in particular to all CEMAC Banks and economic actors both from CEMAC Countries and outside these countries interested in operating in the CEMAC.

What happened?

As contemplated by article 191 of the CEMAC Regulation 02/18/CEMAC/UMAC/CM dated 21 December 2018 (hereinafter the “FX Regulation”), on the 10th of June 2019, eleven (11) instructions were issued by the Governor of the Bank of Central African States (“BEAC”) to facilitate the interpretation and implementation of the FX Regulations.

The FX Regulation applies to all six (6) Central African states (Cameroon, Central African Republic, Chad, Congo, Equatorial Guinea and Gabon). It applies in particular to all CEMAC Banks and economic actors both from CEMAC Countries and outside these countries interested in operating in the CEMAC.

The FX Regulation together with its Instructions brought more clarity to foreign exchange operations within and outside the CEMAC, precising documents and even time limits within which to request necessary authorisations or effect declarations. It equally went further to cover areas the Old regulation omitted and implemented stricter monitoring by the Bank of Central African States (“BEAC”) in this respect.

Although the FX Regulation entered into force on the 1st of March 2019, economic operators and financial intermediaries were granted a six (6) months grace period to comply. Some of the instructions issued by the BEAC extend the grace period applicable to particular aspects covered by the instructions.

The Order reaffirms that any person who enters Equatorial Guinea to work or do business as an employed or self-employed worker must obtain a work permit.

What are the Instructions?

The instructions issued by the BEAC cover the following aspects:

  • Terms and conditions for the importation of foreign bank notes by banks
    (Instruction n°001/GR/2019 relative aux conditions et modalities d’importation de billets de banque étrangers par les établissements de crédit);
  • Fees applicable to transfer operations
    (Instruction n°002/GR/2019 relative à la tarification des operations de transfert);
  • Onlending of foreign currency by Banks to the BEAC
    (Instruction n°003/GR/2019 relative à la retrocession des devises à la BEAC par les établissements de crédit).
  • Terms and conditions for the opening and operation of foreign currency accounts by residents and non-residents
    (Instruction n° 005/GR/2019 relative aux conditions et modalities d’ouverture et fonctionnement des comptes en devises des residents et non-residents).
  • Terms and conditions for the declaration, domiciliation of the exportation of goods and services and the repatriation of the proceeds thereof to the CEMAC
    (Instruction n°006/GR/2019 précisant les conditions et modalités de déclaration, domiciliation des exportations de biens et services et de rapatriement dans la CEMAC des recettes afférentes).
  • Terms and conditions for the declaration, domiciliation and settlement of the importation of goods and services
    (Instruction n°007/GR/2019 précisant les conditions et modalités de déclaration, domiciliation et de règlement des importations de biens et services).
  • Terms and conditions for the use of instruments for electronic payments outside CEMAC
    (Instruction n° 008/GR/2019 relative aux conditions et modalités d’utilisation à l’extérieur de la CEMAC des instruments de paiement électronique).
  • Status of the sub-delegated institutions within the context of manual exchange of foreign currency
    (Instruction n° 009/GR/2019 relative au statut d’établissement sous délégataire dans le cadre de l’activité de change manuel)
  • Issuance of foreign transferable securities in the CEMAC
    (Instruction n°012/GR/2019 relative à l’émission des valeurs mobilières étrangères dans la CEMAC);
  • Communication of information to the Central Bank (BEAC) within the framework of the follow up of the Exchange Control Regulation
    (Instruction n° 013/GR/2019 relative à la communication des informations à la Banque Centrale dans le cadre du suivi de la Règlementation des changes) ; and
  • Rules and Procedures establishing offences related to the exchange control regulation and the implementation of related sanctions
    (Instruction n°014/GR/2019 relative aux règles et procédures de constatation des infractions à la réglementation de changes et à la mise en œuvre des sanctions et afférentes).

What are the consequences?

On foreign currency accounts

(Instruction n° 005/GR/2019 relative aux conditions et modalités d’ouverture et fonctionnement des comptes en devises des residents et non-residents)

This instruction is issued in application of articles 41, 43 and 191 of the FX Regulations. It provides instructions concerning the provisions of articles 41 to 52 of the FX Regulation. It instructs on:

  • opening and operation of foreign currency accounts outside the CEMAC by residents
  • opening and operation of foreign currency accounts within the CEMAC by residents
  • opening and operation of foreign currency accounts within the CEMAC by non-residents
  • opening and operation of XAF currency accounts within the CEMAC by non-residents

In summary, it states:

  • That residents are eligible to operate offshore and onshore foreign currency accounts (available to resident Banks only). Resident Legal persons can open and operate such accounts with prior authorisation of the BEAC. Natural persons can open and operate foreign offshore accounts but must declare them to the BEAC
  • That non-residents are eligible to operate foreign currency onshore accounts and XAF currency accounts
  • The information to be contained in the application for authorisation to operate an offshore and onshore foreign currency account, the documents accompanying the application and the competent persons to make the application (the legal person or the CEMAC bank as the case may be)
  • The term of operation of the account (2 years renewable)
  • The reporting formalities to be done to the BEAC as regards the operation of such accounts and who does the reporting depending on the type of account
  • The conditions for application of renewal (similar to initial application)
  • The consequences of rejection of applications for renewal
  • The sanctions for non-compliance with the terms of the regulation

A Circular letter (Lettre Circulaire n°010/GR/2019 portant fonctionnement des comptes ouverts en devises aux noms des non-residents dans les banques de la CEMAC) was issued to further elaborate on the conditions for the opening and operating of foreign currency accounts within the CEMAC by non-residents and is addressed to all CEMAC Banks.

On the Exportation of Goods and Services

(Instruction n°006/GR/2019 précisant les conditions et modalités de déclaration, domiciliation des exportations de biens et services et de rapatriement dans la CEMAC des recettes afférentes)

This instruction is issued in application of articles 60 and 191 of the FX regulation. It provides instructions in relation to the provisions of articles 53 to 60 and 67 to 70 of the FX Regulation. It instructs on:

  • Declaration of the exportation of goods and services.
  • Domiciliation of the exportation of the goods and services.
  • Operations exempted from the obligation of domiciliation subject to justification by the exporter.
    These include:
    (a) Provision of foreign aircraft and ships with petroleum products and ships’ stores;
    (b) Sample shipment or small quantity advertising items not for sale;
    (c) Shipment of reusable packaging to be re-imported or whose value is not included in the value of the goods. However, when these packages are not recorded, their value must be entered on the export declaration;
    (d) Sending the personal property of diplomats at the end of their stay;
    (e) Sending goods obtained from an inheritance; and
    (f) Permanent relocation outside CEMAC.
  • Modalities for the repatriation of the proceed of the exportation of goods and services.
  • Clearance of the domiciliation file for the exportation of goods and services.

On the modalities for the repatriation, it is worth noting that exporters of goods and services have 150 days from the effective date of exportation to repatriate the proceeds (i.e. have the money owed to them received by the financial intermediaries within the CEMAC and credited to their accounts).

The foreign currencies to be repatriated are those relating to proceeds from the exportation of goods and services, loans, advances through shareholder loans (“avances en comptes courant”), revenues, donations, direct and portfolio investment and transfers without compensation.

The non repatriation of proceeds from exportation resulting from non-conformity, damage or loss will have to be justified by the exporter.

Importation of Goods and Services

Terms and conditions for the declaration, domiciliation and settlement of the importation of goods and services (Instruction n°007/GR/2019 précisant les conditions et modalités de déclaration, domiciliation et de règlement des importations de biens et services).

This instruction is issued in application of articles 64, 74, 75 and 191 of the FX regulation. It provides instructions in relation to the provisions of articles 61 to 64 and 71 to 75 of the FX Regulation. It instructs on:

  • Declaration of the importation of goods and services
  • Domiciliation of the importation of the goods and services
  • Operations exempted from the obligation of domiciliation
  • Settlement of importation of goods and services
  • Clearance of the domiciliation file for the importation of goods and services
On Online Shopping and Withdrawals from Foreign Cash Points (ATMs)

(Instruction n° 008/GR/2019 relative aux conditions et modalités d’utilisation à l’extérieur de la CEMAC des instruments de paiement électronique)

This instruction is issued in application of article 191 of the FX regulation. It provides instructions on the provisions of articles 33 to 35 of the FX Regulation. It instructs on the following aspects:

  • Type of authorised instruments for electronic payments abroad: debit bank cards, credit cards or prepaid cards.
  • Types of operations for which these instruments can be used: payment, withdrawal from cash points or terminals located outside CEMAC and online payments.
  • Limitations to the use of such instruments abroad: current transactions only within the limit provided by the FX regulation.
  • Financial limitations for some operations: 5 million XAF per person and per trip are free subject to the respect of the regulations against money laundering; above this limit, justification will need to be provided before or after the operation.
  • Financial limitations for online payments: 1 million XAF per month and per person subject to the respect of the regulations against money laundering; justification will need to be provided before or after operation to the financial intermediary within 30 days by any means providing acknowledgement thereof.
  • Information to be provided by issuers (usually Banks) of operations made with such instruments to the BEAC on a monthly basis.
  • Controls can be carried out by the COBAC and BEAC of the documents provided.
On the Issuance of Foreign Transferable Securities in the CEMAC

(Instruction n°012/GR/2019 relative à l’émission des valeurs mobilières étrangères dans la CEMAC)

This instruction is issued in application of article 191 of the FX regulation. It provides instructions on the provisions of articles 99 to 102 of the FX Regulation. It instructs on the following aspects:

  • Conditions for the prior declaration to the issuance, publicity and offer or assignment of foreign transferable securities, to be done 15 days before the date of the envisaged operation for a total amount below 50 million XAF.
  • Documents accompanying the declaration.
  • Conditions for the prior authorisation for the issuance, publicity and offer or assignment of foreign transferable securities for an amount above 50 million XAF .
  • Documents accompanying the authorisation application, which the BEAC may request more of.
  • The BEAC has 30 days to respond from the date of receipt of the file, failing this the authorisation will be considered as approved.
  • Conditions for the prior authorisation of the proceeds of such issuance abroad.
  • Documents accompanying the authorisation application.
  • The BEAC has 10 working days to respond from the date of receipt of the file, failing this the authorisation will be considered as approved.
  • Conditions for the communication of information at the close of the operation to the BEAC.
On Communication of information to the Central Bank

(Instruction n° 013/GR/2019 relative à la communication des informations à la Banque Centrale dans le cadre du suivi de la Règlementation des changes)

This instruction is issued in application of article 191 of the FX regulation. It provides instructions on the provisions of articles 144 to 146 of the FX Regulation. It instructs on the following aspects:

  • Defines the economic operators to which it applies.
  • Time within which financial intermediaries have to carry out the periodic declarations to the BEAC.
  • Time within which microfinance institutions, foreign exchange offices and payment institutions have to carry out periodic declarations to the BEAC .
  • Time within which public administrations have to carry out periodic declarations to the BEAC .
  • Identification of operations requiring timely declaration.
On Violations & Sanctions

(Instruction n°014/GR/2019 relative aux règles et procédures de constatation des infractions à la réglementation de changes et à la mise en œuvre des sanctions et afférentes)

This instruction is issued in application of articles 156 and 191 of the FX regulation. It provides instructions on the provisions of articles 153 to 180 of the FX Regulation. It instructs on:

  • Competent bodies to establish the commission of the offence and their scope (BEAC, COBAC, Ministry of Finance, Banks).
  • Procedure for offences established from the control of documents.
  • Procedure for offences established from ‘on the spot’ controls.
  • The competent body to implement the sanctions (BEAC informs the body who established the offence).
  • Procedure for the implementation of administrative pecuniary sanctions.
  • Procedure for the implementation of non-pecuniary administrative sanctions.

Exceptions to the Regulation

It is worth reiterating that pursuant to section 184 of the FX Regulation, neither the CEMAC member States nor the BEAC can carve out exceptions to its provisions through the enactment of local laws or by entering into contracts.

Recommendations

Economic operators, financial intermediaries and banks should contact their advisors promptly to request a copy of these instructions to the FX Regulation and seek further advice with regards to its ramifications and implement measures to ensure compliance. As a minimum, they should consider the below measures:

  • Read and understand all the requirements imposed by these instructions.
  • Start working on compliance thereof within the grace period provided by them bearing in mind that they are in force from the signing date (10 June 2019).
  • Organise trainings and seminars for both the operators and the financial intermediaries to create awareness of the FX regulation and the instructions which have been issued.
  • Inform co-contracting partners located outside CEMAC of the possible impact it may have to ongoing or future business with CEMAC resident economic operations.

  • The Finance and HR departments ought to perform an assessment of the affected expatriate personnel and their families, if applicable, and inform them about the new rules and their ramifications.

It is worth noting that financial intermediaries and banks within the CEMAC are already implementing some of the processes and measures provided under these instructions and the FX regulation in general.

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